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Informist, Thursday, Sept. 10, 2026

 

By Cassandra Carvalho

 

MUMBAI – Prices of government bonds ended lower for the second consecutive session Thursday, but the fall was cushioned from the impact of near-month Brent crude oil futures topping $102 per barrel as systemic liquidity remained ample, dealers said. Investors bought gilts to build their books, but traders remained on the sidelines amid disparity in gilt yields and global rates, making for low volumes. 

 

The 10-year benchmark 6.94%, 2036 bond ended at INR 99.74, against INR 99.87 Wednesday. The yield on the bond rose to 6.9762% from 6.9568% at the end of the previous session. The bond traded in a range of INR 99.70 to INR 99.85 during the day, while Brent crude oil futures for delivery in November traded between $100.19 per barrel and $102.15 during the same time, crossing $103 per barrel post 1700 IST.

 

"We will see yields rise on an auction-to-auction basis, because right now traders are sitting lighter, and there is good liquidity in the market," a fixed income head at a mutual fund said. "There's not much of selling in the secondary market. And things are much too volatile, so people don't want to take a short call if oil prices fall." 

 

Surplus liquidity in the banking system remained near INR 10 trillion, with money market rates below the central bank's Standing Deposit Facility rate. Even as the 10-year US Treasury yield rose closer to 5.00%, traders refrained from taking fresh short positions, limiting the amount of sales in the market, even as there was a dearth of fresh buying. Traders await measures from the central bank to drain durable liquidity, as chances of a rate hike by the Reserve Bank of India's Monetary Policy Committee increase amid US yields and crude oil prices rising, dealers said. The central bank conducted dollar-rupee sell-buy swaps in the foreign exchange market Wednesday and Thursday to drain surplus liquidity, but traders in the bond market shrugged off the move since the tenure of these swaps was concentrated in the one-month and two-month segment, while the surplus liquidity has largely come in through three- to five-year FCNR(B) deposits, meriting a longer-duration measure to drain liquidity, they said. 

 

"There's nothing to do as a trader but stay away. It's high time we should correct to global rates, and soon enough RBI should come up with something for liquidity," a trader at a primary dealership said. "If RBI indicates that it is increasing the duration of its liquidity drain, that is when yields will go up."

 

The total turnover on the RBI's Negotiated Dealing System–Order Matching system was INR 342.40 billion, falling further from INR 379.55 billion Wednesday. It has consecutively fallen during the week as traders refrain from fresh positions.

 

OUTLOOK

On Friday, gilts are seen down as Brent crude oil prices hit $107 per barrel post market hours, and the yield on the 10-year US Treasury note rose to just short of the key 5.00% level. Foreign portfolio investors are likely to continue selling gilts, as has been seen this week, as the interest rate differential between US yields and Indian gilt yields narrows, making the latter less appealing. Traders will also track participation at the central bank's 26-day variable rate reverse repo auction it will conduct Friday, the second such auction it is conducting this month with the option of pre-mature reversal and the reversal date on Oct. 7 – the day of the MPC's October meeting outcome.

 

Traders expect the central bank to introduce measures to drain durable liquidity this month, as high crude oil prices push up the outlook for inflation. The central bank likely increased the size of its dollar-rupee sell-buy swaps conducted in the foreign exchange market Thursday from about $2 billion conducted in one- and two-month tenures Wednesday, dealers said. Traders expect the yield on the 10-year benchmark bond to hit 7.10%, tracking global yields and as rate hikes are priced in, though this is seen unlikely in the near term amid flush liquidity. Traders will also track the result of the INR-320-billion gilt auction Friday, with demand across the three bonds being sold seen moderate.  

 

Focus will also be on the US Federal Open Market Committee's mid-month rate decision, dealers said. The FOMC decision will be a key trigger for the RBI's Monetary Policy Committee's repo rate decision in October, dealers said. US CPI inflation for August, due Friday, is seen at 3.4% on year, according to a survey compiled by The Wall Street Journal. India's CPI inflation for August is seen at 4.8%, according to an Informist poll, while market participants expect it between 4.9% and 5.1%, rising further from the central bank's 4% target.

 

Traders are also waiting for the release of the borrowing calendar for state and central government bond issuances for the next quarter and the second half of the current financial year, respectively. They want to see the proportion of different bond tenures in the calendar, dealers said. The RBI has held several meetings with market participants this week, the last to discuss the Centre's borrowing calendar, they said. 

 

Any significant movement in the rupee and swap rates will also lend cues, they said. The yield on the 10-year benchmark 6.94%, 2036 bond is seen moving between 6.93% and 7.10%, dealers said. A few traders said that a strike by unions of bank employees on Friday might disrupt some banking operations, though it is likely to be concentrated to retail operations. 

 

	THURSDAY		WEDNESDAY
	PRICE	YIELD	PRICE	YIELD
6.94%, 2036	99.7350	6.9762%	99.8700	6.9568%
6.48%, 2035	97.0000	6.9301%	97.0875	6.9165%
6.36%, 2031	99.3750	6.5231%	99.4300	6.5085%
7.06%, 2041	99.4800	7.1160%	99.5850	7.1044%
7.24%, 2055	96.0000	7.5825%	96.2500	7.5604%

 

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India Gilts: Near day's low on intraday rise in Brent crude oil prices

 

	1432 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	99.76	99.85	99.76	99.78	99.87
YTM (%)	6.9726	6.9604	6.9730	6.9698	6.9568

 

MUMBAI-–1432 IST--Government bond prices were near the day's low as Brent crude oil prices rose above $102 per barrel in intraday trade, dealers said. Moreover, the 10-year benchmark US Treasury yield rose intraday, which also pulled down bond prices, dealers said. Some public sector banks likely bought gilts, which kept the rise in bond yields contained, dealers said. 

 

"Crude is the reason we are down...volume has also been very low for some days," a dealer at a state-owned bank said. "Given the crude level, we would have been much higher (higher yield on the 10-year benchmark 6.94%, 2036 bond). It is only because of liquidity...we are still around 6.96–6.97% (yield on the 10-year benchmark 6.94%, 2036 bond)." 

 

Brent crude oil futures for mid-month delivery were at $102.27 per barrel, up from $100.93 per barrel at 0900 IST and $100.73 at the end of Indian trading hours Wednesday. The yield on the 10-year benchmark US Treasury yield was 4.86%, up from 4.85% at 0900 IST and 4.81% at 1700 IST Wednesday. 

 

Trade volume in the secondary market remained subdued as traders refrained from building aggressive positions ahead of the release of US CPI data, followed by India's August CPI data. Traders will closely track the US CPI data on Friday, along with the result of the INR-320-billion weekly gilt auction, dealers said. The total traded volume in the government securities market at 1432 IST was INR 219.25 billion, lower than INR 28.65 billion at 0930 IST Wednesday, according to data from the Clearing Corp. of India Ltd. The yield on the 10-year gilt is seen in a range of 6.92–7.00% during the day, dealers said. 

 

The fall in bond prices was limited as public sector banks likely picked up bonds, continuing their buying momentum from Wednesday when they net bought INR 24.21 billion worth of gilts. Some traders said private sector banks likely covered their short bets, which also supported bond prices. However, excess liquidity in the banking system remains the major support for bond prices, the dealer said.

  

At the weekly gilt auction Friday, traders are expected to place bids for the short-term paper at higher yields, dealers said. Some traders, however, expect demand for the short-term bond to be firm due to deployment of funds from foreign currency non-resident (bank) deposits, dealers said. Demand for long-term bonds is likely to be firm, dealers said. The government will sell INR 110 billion of the 6.20%, 2029 bond, INR 110 billion of the 6.57%, 2033 bond, and INR 100 billion of a new 2056 bond on Friday.  (Janwee Prajapati)

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India Gilts: Off lows on slight ease in Brent crude oil prices, US yields

 

	1225 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	99.83	99.85	99.76	99.78	99.87
YTM (%)	6.9629	6.9604	6.9726	6.9698	6.9568

 

MUMBAI-–1225 IST--Government bond prices were off the day's low Thursday, tracking a slight ease in Brent crude oil prices and US Treasury yields, dealers said. Traders refrained from placing aggressive bets amid fears of further escalations in the war in West Asia, which kept the trade volume low Thursday. 

 

The total turnover in the government securities market at 1225 IST was INR 131.65 billion, lower than INR 166.10 billion at 1230 IST Wednesday, according to data from the Clearing Corp. of India Ltd. Traders also remained cautious as they awaited the release of US CPI inflation data Friday. Inflation in the world's largest economy is seen rising 3.4% on year in August, according to a survey compiled by The Wall Street Journal. A higher-than-expected number could push US yields higher, which is likely to put pressure on bond prices, dealers said. 

 

Bond prices were supported on slight softening of Brent crude oil prices, dealers said. Brent crude oil futures for November delivery were traded at $100.35 per barrel at 1225 IST, nearly 0.56% lower than its level at 0900 IST. Oil prices were down amid no fresh escalation during the day. However, with no end to the war in sight and fears of further escalations, Brent crude continued to trade above $100 per barrel.   

 

Tracking a slight fall in oil prices, US yields also eased intraday, which supported Indian bond prices, dealers said. The yield on the 10-year benchmark US Treasury note was at 4.83% at 1225 IST, down from 4.85% at 0900 IST. Traders will closely track any movement in oil prices and US yields during the day as a rise can pressurise bond prices, they said. 

 

"Crude and UST (US Treasury yields) are the two factors that are playing out in the market along with a large liquidity surplus," a dealer at a state-owned bank said. "War-related concerns are preventing people from taking fresh positions, which is why volume is so low today (Thursday), if crude softens more, we might see volume picking up." 

 

A large banking system liquidity surplus supported bond prices, dealers said. The Reserve Bank of India's net liquidity absorbed--a proxy for the banking system liquidity surplus--remained little changed at INR 10.50 trillion Wednesday from INR 10.49 trillion Tuesday. Traders expect the RBI to announce some durable measure to drain out liquidity surplus.

 

Traders will also closely track any developments in the West Asia war which could impact crude oil prices and in turn bond prices. The yield on the 10-year 2036 bond is seen in a range of 6.95–7.00% during the day, dealers said.  (Diksha Tripathy) 

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India Gilts: Down as Brent crude rises closer to $102/bbl, US yields up

 

	0925 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	99.82	99.83	99.76	99.78	99.87
YTM (%)	6.9636	6.9626	6.9726	6.9698	6.9568

 

MUMBAI--0925 IST--Price of government bonds fell tracking a rise in Brent crude oil future prices to near $102 per barrel due to escalations in West Asia, dealers said. The overnight rise in US Treasury yields also pulled down bond prices, dealers said. However, the fall in bond prices were capped due to excess liquidity in the banking system. Trade volume remained subdued for the fifth consecutive session as traders refrained from building aggressive positions ahead of the release of US CPI data Friday, dealers said. Traders are likely to make some space in their portfolio later in the day for the fresh supply of three gilts at the weekly gilt auction Friday, dealers said.  

 

"Pressure is there (on bond prices) due to a rise in Brent crude oil prices...it is above the hundreds," a dealer at a private sector bank said. "I do not think we will see any significant move in 10-year bond prices throughout the day unless Brent prices move." 

 

Brent crude oil futures for November delivery were at $101.04 per barrel, up from $100.82 at the Indian trading hours Wednesday. A fresh wave of military escalation between the US and Iran has sent shock waves through energy markets, as shipping through the vital Strait of Hormuz remained severely restricted. The latest rise was reported due to US military targeting Iranian vessels in the Persian Gulf and Sea of Oman, which prompted immediate retaliatory missile attacks from Tehran against American positions in the region. Iran's Ministry of Foreign Affairs condemned the operations, calling the strikes on commercial vessels an extension of a naval blockade and economic warfare. Tehran said its defensive response was justified under international law, warning that continued aggression threatens regional and global stability.

 

The 10-year benchmark Treasury yields reached their multi-year highs after the announcement of an enlarged Treasury buyback of longer-dated bonds disappointed some investors ‌who had wanted more. The Treasury Department said Wednesday that it would buy up to $6 billion of 10- to 20-year Treasury bonds in a buyback operation Thursday, three times the size of its previous long-dated operation. The yield on the 10-year benchmark US Treasury yield was at 4.85%, up from 4.81% at 1700 IST Wednesday. 

 

Despite a sharp rise in crude oil prices and US Treasury yields, the fall in bond prices was capped as the banking system liquidity remained in excessive surplus, dealers said. The RBI's net liquidity absorbed – a proxy for the banking system liquidity surplus – little changed at INR 10.50 trillion Wed from INR 10.49 trillion Tuesday.

 

Traders were also cautious of building aggressive bets as they await the release of US CPI inflation data Friday, which is likely to be hit by higher energy prices, dealers said. The US CPI inflation data will be a key factor for the Federal Open Market Committee's decision on raising the policy rate, dealers said. This kept trade volume subdued. The total traded volume in the government securities market at 0925 IST was INR 14.55 billion, lower than INR 28.65 billion at 0930 IST Wednesday, according to data from the Clearing Corp. of India Ltd. The yield on the 10-year gilt is seen in a range of 6.92–7.00% during the day, dealers said.

 

Traders will also closely track the result of the weekly gilt auction on Friday and is likely to make some space in their portfolio for the fresh supply of three gilts, dealers said. The government will sell INR 320 billion of three gilts on Friday, the Reserve Bank of India said in a release Monday. The government will sell INR 110 billion of the 6.20%, 2029 bond, INR 110 billion of the 6.57%, 2033 bond, and INR 100 billion of a new 2056 bond on Friday.  (Janwee Prajapati) 

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India Gilts: Seen sharply down as Brent crude above $101/bbl, US yields jump

 

MUMBAI – Government bond prices are seen opening sharply lower Thursday, tracking a rise in Brent crude oil prices and US Treasury yields, dealers said. The risk of further escalation in the war in West Asia is likely to dampen market sentiment, dealers said. While most traders are likely to maintain caution amid renewed fighting between the US and Iranian forces, some traders may trim positions, which is likely to weigh on bond prices Thursday.

 

The yield on the 10-year benchmark 6.94%, 2036 bond is expected to open around 6.98% Thursday and move between 6.95% and 7.02% during the day, dealers said. Wednesday, the bond ended at INR 99.87, or a yield of 6.9568%. Some traders may buy the 10-year benchmark bond if the yield rises to 7.00%, which could help defend the level. However, most traders are likely to avoid aggressive bets amid renewed fighting between the US and Iran, which is likely to weigh on bond prices. 

 

Brent Crude oil futures for November delivery rose overnight and were at $101.64 per barrel at 0750 IST, up nearly 1% from the end of Indian gilt market hours Wednesday. Oil prices came under pressure as Iran said Wednesday it had attacked 10 ships near the Strait of Hormuz after the US sank five Iranian oil tankers, marking the biggest declared wave of tit-for-tat attacks on shipping by both sides since the start of the six-month-old war, according to a Reuters report.

However, US President Donald Trump Wednesday said the war with Iran will end "immediately after" the US midterm elections, which are due in November, as per a Reuters report. Trump said Tehran was trying to influence the vote ahead of the elections. The US president also said oil prices would come down right after the election as the war will be over, while acknowledging diplomatic talks are still a possibility but not preferred, Reuters reported. The US-Iran war has entered its seventh month with no immediate end in sight and this has left investors worried. 

   

The rise in oil prices over the past few sessions and the escalation of the war in West Asia have fuelled concern about a potential inflationary shock, particularly as investors assess the implications for central banks' interest rate path. Traders also await the US inflation data due Friday, the final major economic indicator before the Federal Open Market Committee's Sept. 15-16 meeting. Markets are pricing in roughly a 60% probability of a rate hike this month, according to the CME FedWatch tool. 

 

Thursday, bond prices may also take cues from a sharp overnight rise in US Treasury yields, dealers said. US yields jumped to multi-year highs after the US Treasury announced plans to triple its bond buybacks. The Treasury Department Wednesday said that it would buy up to $6 billion of 10- to 20-year Treasury bonds in a buyback operation Thursday, three times the size of its previous long-dated operation. The Treasury said last month it would at least double its buybacks of longer-dated securities to $4 billion over the next quarter to support market liquidity. Following the announcement, the yield on the benchmark 10-year US Treasury note reached its highest level since November 2023 and was traded at 4.85% at 0800 IST. Traders will assess the impact of this rise closely, they said.  

 

Traders will also be closely watching for any measures by the Reserve Bank of India to drain surplus liquidity this week. The surplus liquidity in the banking system is expected to warrant measures to drain durable liquidity beyond the variable rate reverse repo operations the RBI is currently conducting, they said.

 

Traders await the release of the borrowing calendar for state and central government bond issuances for the next quarter and the second half of the current financial year, respectively. Traders will also focus on the proportion of different bond tenures in the calendar, dealers said. The RBI has begun meetings with market participants to discuss the Centre's borrowing calendar, they said.  (Diksha Tripathy)  

 

End

 

US$1 = INR 95.44

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Avishek Dutta

 

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